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I’ve heard this from clients plenty of times in the last few weeks. We can cite facts & figures to get clients past their emotions but a good story is so much better. Anyone have one they are willing to share?

Or I would say, "I'm sorry it took so long for me to get in touch with you".
Hold up, I'm re-reading your post. You say clients are telling you this? Or are they prospects?
If they are clients, you've probably done something wrong.
You could pull up information on the Harvard Endowment fund and tell them they have to make money.
Or you could say, "I have heard that from several other folks. Most investors are concerned with benchmarks. Have you ever heard of goals-based investing? Many endowments and institutions have a goal of CPI + 5%. I can assure you that the Harvard and Yale Endowments have made money in the last 10 years. Let me show you how".
I went through this today with a new client who transferred in a bunch of American "suck fest" Funds. Showed him how what he thought was diversified, really wasn't. He couldn't wait to reallocate into some lower-correlated assets.

That question is so negative and so whiny that you just want to hang up on the guyOne way I sometimes answer is either to say that nobody should be the ‘market’ (or the Dow,) which is probably what he’s talking about. 'Come invest with me and you won’t be sitting there watching the crawl all day.'Maybe better to say, ‘Well, let’s get you out of the ‘market’ and show you some ways you can still achieve your goals with income investments and guarantees.’ I had a guy like that whine and complain and beg to be taken out of the stock funds and put into a money market. So when I finally called him in and showed him a CD ladder and said let’s do this, he said, ‘But I’ll miss the rebound.’ Some people just want to be unhappy.

Let’s remember, sometimes perception is NOT reality. I have a client that is really concerned because he is “down 25%” and retiring soon. Well, yes and no. His EQUITY portion of the portfolio is down 25% from the peak, but he sort of “forgot” about the 15% he has in MMKT, the 15% he has in a 5%, 3-year fixed annnuity, and the fact that I convinced him to sell him out of some very aggressive stock positions that represented 15% of his portfolio last July, and WOULD HAVE been down 60%, and the fact that another 15% or so is in bonds, which are down about 10% in aggregate (his int’l bonds are actually up). His OVERALL portfolio with me is down about 10%. So, he chose to look at what he wanted to look at and siad “yeah, but those ‘stock funds’ are way down”. Uhhh, yeah. But that’s why I explained to you when we started that we need this little thing called diversification, and that we are protecting your short-term money.

I remember a conference call a couple years ago where a Jones analyst was talking about setting client expectations, and he said that we should expect average annual returns from the market to be around 6% over the next decade and should adjust our sales pitches going forward to reflect our expectation of lower returns than we’ve received in the past.

That was during the bull run, and of course I completely dismissed his predictions, but now I can't help but think about what he said. If he's indeed correct, is a 6% return from the market worth the associated risk?

Snags, lighten up a bit. I have a couple of clients say this to me and yes, they are the whiny types who let their emotions get to them in the very good or bad times. I have a polite way to tell them to essentially sit down and shut up, but I am not arrogant enough to think I have the only way to do this, or the very best way. So I thought I’d ask the question.

I also have many clients that have been buying in October/November.....including one that called me at 7:15am the morning the futures were limit down. He certainly has his emotions under control.....and his investment account reflects it.

I agree with snags… I think people should take a serious look at how yale and harvard allocate money… Most of the things they invest in(with the exception of private equity) can be replicated for some investors: Check out this link to the 2007 overview of the Yale endowment fund and what they invest in and the returns, much better than the gloomy 6% that Jones says(did Van Kampen tell them that so they could compete with American Funds in the Jones “choice” funds)

[quote=Borker Boy]I remember a conference call a couple years ago where a Jones analyst was talking about setting client expectations, and he said that we should expect average annual returns from the market to be around 6% over the next decade and should adjust our sales pitches going forward to reflect our expectation of lower returns than we’ve received in the past.

That was during the bull run, and of course I completely dismissed his predictions, but now I can't help but think about what he said. If he's indeed correct, is a 6% return from the market worth the associated risk?
[/quote]
I have heard the same thing from many sources.
Let's not forget he was probably referring to the domestic market, and probably more or less the S&P 500. When you throw in int'l, emerging markets, commodities, small caps, etc. that 6% number could be much different. If you include fixed income, maybe you get 6% with a lot less risk than the "market."

I could be totally off, but my interpretation was that he was referring to what our average client--mutual fund investors--should expect to earn in their portfolio, and I'd imagine that he's assuming that our portfolios are comprised of all, or most, of the asset classes you mentioned above.

I don't think he would have focused so much on the need to adjust client expectations going forward if he were talking about returns from a specific sector. That's way too detailed for most Jones clients.

Why exactly do American Funds suck? Because they tracked the market and everything got whacked this year? Sounds like you gave this client a sales pitch to get out of undoubtedly A share/low cost mutual funds into something that has a better short term track record but possibly higher fees.

Tell me you didn't sell all of the A-share American Funds that rolled over!
I have to chuckle when financial consultants question the multi-manager approach at Capital Guardian who manages billions if not trillions (probably billions now after the pullback and redemptions). Undoubtedly someone with a series 7 & 63 knows better than 70 years of experience managing money!

[quote=Gordon Gekko]Why exactly do American Funds suck? Because they tracked the market and everything got whacked this year? Sounds like you gave this client a sales pitch to get out of undoubtedly A share/low cost mutual funds into something that has a better short term track record but possibly higher fees.

Tell me you didn't sell all of the A-share American Funds that rolled over!
I have to chuckle when financial consultants question the multi-manager approach at Capital Guardian who manages billions if not trillions (probably billions now after the pullback and redemptions). Undoubtedly someone with a series 7 & 63 knows better than 70 years of experience managing money![/quote]
Didn't sell all of them, just about half, and put it into a VA so the client could get guarantees.
If it was all about the low cost, it would've been better in the index funds. Client wanted the guarantees, so I gave it to him.

For the last year, I would agree with the suckfest claim. I do think they'll recover quicker once things settle down. They invest a bundle in research and that has to be worth something over the longer term.

I hear this a lot but 10 years is waaaay too long to not be making any money in the market. I mean, in all of it? Some were up and most were down yes, but not as long as 10 years. I know some people who invested in 2003, lost part of their money til 2008, held on, didn't let their emotions run and now made back their money in 2009 and more this year.

the problem with the average investor in the last 10 years was that a) most did not stay invested entirely with their assets correctly allocated over that full period. Most got emotional, panicked and pulled out of the market in 2001/2002, never got the rebound effect from 2003-2006 or were very late to the game, or b) they were almost entirely if not entirely invested in equities. The broad equity markets from 99-09 was flat, so they would be correct. If you simply backdate a moderate allocation over that same period of time, you see portfolio returns that average anywhere from 5-7% and cumulatively almost doubling in value over that period.

This is the exact reason why I laugh when people claim that "asset allocation is dead." The problem is, most investors are WAY too impatient.

Nova, I totally agree. Investing is simple, that's why I use ETFs and charge for broader plalning advice, focusing on mild tactical asset allocation which is probably more to let the client know I'm paying attention.

If you keep sending the client dividends and interest, so they can eat, they can handle flat returns, even some downside excitement. The purpose of investment, is future/current income... As advisors it's wise to remember our purpose.

I try to also look on the bright side. If the last 10 yrs have been sucky, turbulent, full of pain, then the next 10 yrs probably will revert to the mean, and we'll have a nice rising market. I also see advisors like myself, that have been in the market for a long time, having the oppty to grow significantly.

How could someone with a brain not make money in the last 10 years? The only thing that was flat was if you had 100% in the SP500. Who with a brain would do such a thing? I would tell them that you need to meet with them ASAP to make sure they don't do that again.

[quote=Squash]I agree with snags... I think people should take a serious look at how yale and harvard allocate money... Most of the things they invest in(with the exception of private equity) can be replicated for some investors: Check out this link to the 2007 overview of the Yale endowment fund and what they invest in and the returns, much better than the gloomy 6% that Jones says(did Van Kampen tell them that so they could compete with American Funds in the Jones "choice" funds)

http://www.yale.edu/investments/Yale_Endowment_07.pdf [/quote]

just to update the link above since someone resurrected this thread...

http://www.yale.edu/investments/

p.s. Squash, what are some names/tickers you use for the “absolute return” and “real asset” allocations?